A change from the cost approach to the market approach of measuring fair value is considered to be what type of accounting change?
Answer(s): A
Choice "a" is correct. A change in the valuation technique used to measure fair value is a change in accounting estimate.Choice "b" is incorrect. Per SFAS No. 157, a change in valuation technique is a change in accounting estimate, not a change in accounting principal.Choice "c" is incorrect. Although a change from the cost approach to the market approach is a change in valuation technique, a change in valuation technique is not defined as a type of accounting change, but instead falls into the category of changes in accounting estimate. Choice "d" is incorrect. Both the market approach and the cost approach are acceptable methods of measuring fair value per SFAS No. 157; therefore, switching between these methods is not the correction of an error. Additionally, an error correction is not a type of accounting change.Supplemental Questions
According to the FASB conceptual framework, the objectives of financial reporting for business enterprises are based on:
Answer(s): D
Choice "d" is correct. The FASB conceptual framework states that the objectives of financial reporting stem from the informational needs of the external users of the information. SFAC 1 para. 28 Choice "a" is incorrect. Conservatism is an underlying concept for financial accounting but is not the basis for the objectives. SFAC 2 para. 91-97Choice "b" is incorrect. Information concerning management's stewardship is only one aspect of the information financial statements are intended to provide. SFAC 1 para. 50 Choice "c" is incorrect. Generally accepted accounting principles (GAAP) are derived from and based on the objectives of financial reporting, not the other way around.
According to the FASB conceptual framework, predictive value is an ingredient of:
Choice "d" is correct. Yes - No. Predictive value is an ingredient of relevance but not of reliability.Memorize:Bud's relevance to "PFT."Bud's reliability to "VRN."
According to the FASB's conceptual framework, the process of reporting an item in the financial statements of an entity is:
Choice "a" is correct. Recognition.According to the FASB's conceptual framework, the process of reporting an item in the financial statements of an entity is recognition.
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Venkatesh Aiyar commented on September 23, 2024 I will be taking this exam in early December. If anyone has taken or passed this exam recently, please let me know what I should focus on other than the usual suspects such as consolidation, cash flow etc. UNITED STATES upvote
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